Vietnam Report Joint Stock Company has recently published the Policy Debate No. 6 entitled "Vietnam Economy in 2013 from perspectives of leading businesses".
This report was completed from survey feedback from 192 businesses on the V1000 List - the list of 1,000 taxpayers, VNR500 - the list of 500 largest companies, and FAST500 - 500 fastest-growing businesses. Most businesses showed a pessimistic view on the Vietnamese economy in 2013.
2012 is worse for doing business than in 2011
According to this report, up to 50 per cent of V1000 business leaders note that their business performances in 2012 are worse than in 2011. Only 19 per cent of respondents say their business situations in 2012 are better than 2011. 100 per cent of respondents in the financial - banking industry say business results in 2012 are not as good as in 2011. This outlook is shared by 60 per cent of steel - construction enterprises. This rate is lower than for other industries.
Most companies say that the outlook in 2013 will not be brighter than in 2012. This means that businesses will have to deal with problems for a longer time. Up to 55 per cent of respondents say that the economy will not improve much in 2013. The number of companies that think that the situation in 2013 will be worse than in 2012 is greater than the number of businesses that believe in the opposite.
A majority of businesses think the economy will not be able to recover in 2013. Up to two-thirds of businesses surveyed believe that the economy will not revive in 2013. Only 33 per cent think it will recover in the second half of 2013, while only 1 per cent believe that it will rebound in the next six months. Confidence in economic revival in 2013 has decreased compared to in August 2012, when 60 per cent of businesses surveyed believed in a revitalisation in 2013 or earlier.
The report also shows that a majority of business owners say cost cuts increased their profits in 2012. Profits earned from production and business activities are selected by 45.8 per cent of feedbacks. This picture portrays a vast majority of industries, except for garment and textile industry. Most textile industry companies attribute their profits in 2012 to business expansion, rather than cost reduction.
Apart from their pessimism about economic prospects, businesses also point out the challenges they are most likely to face in 2013: Uncertainty in business environment, a decline in consumer demand on the price market, and a rise in material prices. In addition, they also express their concerns over policy changes as well as fundraising difficulties in 2013.
Restructuring is a must
Despite pessimism about economic prospects of the economy in general and the challenges that they will face in 2013, a majority of businesses believe in the commitment of the government to control inflation and in greater support for banks in 2013. They trust the recent message of the Prime Minister at his answer to the interview by Bloomberg in Hanoi on November 28, that Vietnam’s inflation will be kept at a single-digit rate in 2013. Only 19 per cent expect that inflation in 2013 will be at a double-digit rate. Up to 76 per cent expect to be able to access bank loans in 2013, while 60 per cent say banks do not support businesses (collected from the CEO survey conducted in August 2012). This is a significant rise in business confidence in the banking system. However, up to 50 per cent of businesses expect to use their own funding sources in 2013.
Companies say they also need personnel support for restructuring. Moreover, the government now hopes to maintain a stable and fair business environment for businesses, especially concerning interest rates, inflation and access to capital. Consulting solutions are considered necessary for debt restructuring and corporate restructuring in the present circumstance.
To survive and develop, most enterprises will have to restructure, either voluntarily or not. More than 90 per cent of business leaders admit that restructuring has been, and will be, carried out strongly among Vietnamese enterprises.
In the restructuring process, most businesses expect to keep their personnel scale and capital base unchanged in 2013. Besides, the number of enterprises with the intention of increasing personnel is three times the number intending to reduce their labour force. The number of enterprises planning to increase their capital base is six times the number of companies with the intention of reducing capital.
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